2012 Tax Season Recap

A Record Processing Season

The Department has experienced its most efficient and effective tax processing season in recent memory – perhaps in its history. On May 11, we had processed more than 3 million individual tax returns. We reached this number a full month earlier than last year. In 2011, we did not reach 3 million until June 10. And, we accomplished this while continuing to process all business tax filings and corporate income tax returns.

We are well ahead of schedule on all processing and expect to mail bills for partial and no-remit filings by mid-June. In 2011, that did not occur until late July.

Another Interesting Fact

In an interview with Fox Business News, Governor Daniels noted that our processing of refunds to individual taxpayers improved from 30 days in 2005 to just 16.5 days in 2010. And we anticipate demonstrating a significant improvement on that record when the tally is in this year. In 2005, about 45 percent of our approximately 3.1 million individual returns were filed electronically. This year we appear to be headed to more than 75 percent electronic filings.

Tax professionals have been a part of this success story by increasingly using electronic filing. This significantly reduces our processing time and decreases the time to get a refund to taxpayers. Together we continue to improve on the job of serving Indiana taxpayers. Congratulations.

Legislative Update

The 2012 Indiana General Assembly passed several bills that affect Indiana taxes:

A Brief Summary of Changes to Business/Corporate Tax

Effective July 1, 2012, anyone who files more than 25 W-2G, 1099-R, or WH-18 statements must file them electronically.

Effective July 1, 2012, partnerships must report periodic withholding payments to nonresident partners by March 15 after the end of their tax year, instead of within 30 days of the tax year’s end.

Effective July 1, 2012, partnerships that make only annual payments to nonresident partners must report those by April 15 after the end of their tax year, instead of within 30 days of the tax year’s end.

Effective July 1, 2012, the due date for annual one-time withholding for shareholders of an S corporation is now April 15 instead of March 15.

Effective July 1, 2012, the enhanced prepaid wireless charge on each retail transaction has increased from $.25 to $.50.

Effective Jan. 1, 2013, withholding taxes may be filed annually if the total tax due for the year is less than $1,000. This eliminates the current requirements for quarterly and semi-annual filing.

Retail merchants convicted of selling or offering to sell a synthetic drug (typically called “spice”) will have their RRMC suspended for one year.

The alternative fuel vehicle manufacturing credit, which was to expire on Dec. 31, 2012, has been extended until Dec. 31, 2016.

The new employer tax credit has been extended to Dec. 31, 2016.

Changes to Individual Tax – Automatic Tax Refund Credit

Effective Jan. 1, 2013, the total amount of state reserves available will be calculated after the end of each odd-numbered fiscal year to determine whether an automatic tax refund should occur. Also, the threshold for excess reserves will increase from 10% to 12.5%.

To qualify for the automatic refund, a taxpayer must have filed an income tax return for the taxable year immediately preceding the year in which the state has excess reserves and must have tax liability for the taxable year. The refund will be calculated by dividing the amount of the state excess by the number of taxpayers who qualify for the refund.

Changes to Inheritance Tax

Effective Jan. 1, 2012, the Class A transferee exemption has increased from $100,000 to $250,000.

Effective Jan. 1, 2012, a spouse, widow, or widower of a transferor’s child is a Class A transferee. A spouse, widow, or widower of a transferor’s stepchild is a Class A transferee.

Effective Jan. 1, 2013, a credit will be available for the amount of inheritance tax due for deaths that occur after Dec. 31, 2012. The credit will be 10% in 2013 and will increase by 10% per year through 2021 when it will be phased out.

Changes to Sales Tax

A utility is not required to charge sales tax for utilities that are separately metered or predominately used by a person engaged in recycling after Dec. 31, 2011, or engaged in processing, repairing, floriculture, or arboriculture after Dec. 31, 2012.

Effective July 1, 2012, a taxpayer is allowed to file a claim for refund for sales tax paid on exempt utilities if the claim is filed within 36 months of the service being provided. Current law requires the claim to be filed within 18 months of the service being provided.

Miscellaneous Changes

Effective Jan. 1, 2013, trusts and estates are not required to file a fiduciary tax return if the gross receipts of the entity are less than $600. This corresponds to federal requirements for trusts and estates contained in Section 6012(a) of the Internal Revenue Code.

Professional tax preparers who file more than 50 returns are required to use electronic filing. That threshold drops to 10 returns in 2013.

For more details on the legislative changes, see the 2012 legislative synopsis by clicking here.

All Businesses Required to File and Pay Online

Effective Jan. 1, 2013, ALL businesses in Indiana must file and pay their sales and withholding taxes electronically. The easiest way to electronically file and pay these taxes is through INtax.

INtax is not only a great tool for business owners themselves, but is also a great tool for practitioners. With INtax, a practitioner can file and pay their client’s business taxes; take care of several other record-keeping tasks; manage several business tax types, including Indiana retail sales, out-of-state sales, prepaid sales, metered pump sales, tire fees, fuel taxes, and withholding taxes, and more.

Here are just a few of the other tasks a practitioner can complete using INtax:

Correspond with the Department of Revenue online through a confidential, secure inbox.

Register and edit multiple clients.

View and print a current client list.

Schedule payments up to 30 days ahead.

File a return even when no tax is due for that filing period so clients can avoid best information available (BIA) bills.

Make a separate electronic payment for each client or pay multiple client accounts through a bulk payment upload.

View the client’s payment and return history at any time.

While a client is not required to be registered with INtax before a practitioner can add the client, the client still has the option to register for INtax to be able to access his account information, as well as view the activities of the practitioner. Whether the client registers for INtax or not, he is notified that a practitioner is managing his state taxes using INtax.

The Department will begin notifying all businesses that are not currently electronically paying and filing their sales and withholding taxes in July.

A special edition of Tax Dispatch will be delivered in July discussing the transition to INtax and e-filing in more detail.

Annual Public Hearing

The Indiana Department of Revenue hosted its annual public hearing on June 5, 2012. As required by Indiana Code, the purpose of this annual hearing is to provide taxpayers an opportunity to recommend changes in statutes, departmental policies, processes, and procedures to help the Department better administer tax laws.

Representatives from the CPA Society presented a number of suggestions along with their appreciation for the partnership with the Department.

The next public hearing will be held June 4, 2013, at 9 a.m. at Indiana Government Center South (room TBD).

Save the Date

The “Tax Schools” provide wonderful opportunities to learn up-to-date information about all things taxes, and these schools are just around the corner. These joint collaborations are designed to educate and meet continuing education requirements for attorneys, certified public accountants, certified financial planners, and enrolled agents. Topics include the "Revenue Update," retirement, depreciation, and small business issues among many others.

These events, organized by the Indiana Department of Revenue, Purdue University, Indiana University, and the Internal Revenue Service, occur throughout the state from October through December.

Changes in Inheritance Tax

In this year’s legislative session, some changes to inheritance tax were passed. Senate Enrolled Act 293 will have significant impact on the administration of Indiana’s inheritance tax laws:

It increases the Class A Exemption to $250,000.

It expands the definition of Class A transferee.

It phases out inheritance tax from 2013 to 2021 via an increasing credit.

Increase in Class A Exemption

The Class A Exemption has been increased to $250,000 for decedents dying after Dec. 31, 2011. However, for individuals dying before Jan. 1, 2012, but after June 30, 1997, the Class A Exemption is still $100,000. If returns for individuals dying in 2012 have already been processed using the $100,000 Class A Exemption amount, the estate may need to file a revised IH-6 and obtain a new order determining tax (Form IH-9) if one has already been issued by the court.

The tax rates and method of calculating tax on the transfer of an amount over the exemption for Class A, B, and C transferees remain the same.

Expansion of the Definition of Class A Transferee

SEA 293 has also expanded the definition of Class A transferee to include a spouse, widow, or widower of a child or stepchild of a transferor for a decedent who dies after Dec. 31, 2011.Decedents dying before Jan. 1, 2012, who made taxable transfers to a spouse, widow, or widower of a child or stepchild have the following exemption amounts:Natural child – Class B ($500 exemption)Stepchild – Class C ($100 exemption)

Phase-out of Inheritance Tax

A gradual nine-year phase-out of Indiana’s inheritance tax will begin in 2013 and end in 2022 via an increasing credit. The credit is tied to individuals dying during a particular calendar year, and the credit increases in 10% increments each year starting in 2013. The tax is repealed for decedents dying after Dec. 31, 2021. The credit is to be applied by the county treasurer or Department of Revenue when the tax is paid.

Year of Death

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

Credit

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Repealed

If you have any questions about this new law, please contact Don Hopper, Inheritance Tax Administrator, at dhopper@dor.in.gov or call 317-232-2154 to talk with him or other Department staff.

New and Updated Tax Bulletins, Directives, and Notices Available Online

Be sure to check the Department’s Web site regularly for additional updates to tax bulletins, directives, and notices at http://www.in.gov/dor/3330.htm

Get Connected and Get Critical Updates from the Department

It is important for tax practitioners to know the various ways in which they can contact the Department if they are in need of help or want to receive critical updates from the Department.

When you have a specific question that our website does not answer, you are encouraged to use the online inquiry center to send your questions and concerns directly to our tax professional area. If you have an immediate concern, however, you can contact the Department at (800) 462-6320 (enter 4367) to connect. This number is for the use of tax practitioners only. If a taxpayer would like to contact the Department, he or she can do so at (317) 232-2240.

In addition, the Department now offers several ways for you to learn about important tax updates at your convenience:

To better serve Indiana taxpayers, the Indiana Department of Revenue may occasionally inform taxpayers of new services and results of a survey or invite a randomly selected group of taxpayers to participate in a short electronic survey or focus group. Electronic communication and surveys enable the Department to inform you about our services and helps the Department learn how to better serve Hoosier taxpayers.

Electronic surveys and e-mail messages from the Indiana Department of Revenue will never ask for any financial or personal information, and survey responses are always confidential.

If you are asked for personal or financial information (Social Security number, bank account information, etc.), do not reply or click on any links in the e-mail message. Legitimate organizations should never ask for personal information by e-mail.

If you would like to further verify an e-mail you have received by the Indiana Department of Revenue, please call (317) 232-2379.

Remember, the Indiana Department of Revenue will never request personal information by e-mail.